Regulatory: A little good news for the regulated in Sackett v. EPA

In a 9-0 ruling, the U.S. Supreme Court ruled in Sackett v. EPA that the Environmental Protection Agency (EPA) had violated due process rights in an enforcement proceeding brought under the Clean Water Act. The Act prohibits “the discharge of any pollutant by any person” into a “navigable water” without a permit. Upon finding a violation, the EPA can issue a “compliance order” or file a civil enforcement action. The statute gives the EPA power to fine violators up to $35,700 per day. The EPA contends the amount doubles to $75,000 per day when the EPA prevails against a person who has been issued a compliance order but failed to comply.

In this particular case, the Sacketts owned a residential building lot near Priest Lake, Idaho. Their lot was separated from the lake by several building lots with permanent structures. In preparation for building a house on the lot, the Sacketts brought in fill dirt and rock. Some months later, they received a compliance order from the EPA under the Clean Water Act.

The EPA took the position that the fill dirt and rocks on the Sackett property impacted a “wet land,”( i.e. the Sacketts’ lot). The EPA further took the position that the wet land was “adjacent to” a navigable water, namely Priest Lake. Since the fill dirt and rock were placed on a “wetland,” the EPA took the position that it entered into a navigable water and constituted a discharge of a pollutant under the Clean Water Act.

In response, the Sacketts asked the EPA for a hearing, which the EPA denied. Having been denied a hearing, the Sacketts filed suit in the federal district court for the District of Idaho under the federal Administrative Procedures Act (APA) and the Fifth Amendment to the United States Constitution, arguing they were being denied life, liberty, and property, without due process of law. The federal court in Idaho dismissed their case for want of subject matter jurisdiction and the 9th Circuit affirmed.

Remarkably, the Sacketts were in the position of facing fines of up to $75,000 per day for placing fill dirt and rock on their lot and having nowhere to turn for relief. It was the EPA’s position the Sacketts had to wait until EPA completed the regulatory process in order to appeal. The Supreme Court summed it up as follows: “But the Sacketts cannot initiate that process (the statutory review process), and each day they wait for the agency to drop the hammer, they accrue by the Government’s telling, an additional $75,000 in potential liability.”

The Supreme Court declined to rule on the merits of the dispute, but took up the question of whether a party to such an EPA enforcement action has a right to judicial review.

Chapter 7 of the APA provides for judicial review of final agency actions. The court found that issuance of an EPA compliance order was a final agency action. The compliance order required the parties to restore their property or face significant penalties. The order also represented the “consummation” of the agency’s decision-making process. Finally the court found the parties had no other adequate remedy in a court. The parties were prohibited under the Clean Water Act from initiating any other legal proceedings.

The court went on to find that the APA includes a presumption of judicial review. As stated by the Court:

The APA’s presumption of judicial review is a repudiation of the principle that efficiency of regulation conquers all. And there is no reason to think that the Clean Water Act was uniquely designed to enable the strong-arming of regulated parties into “voluntary compliance” without the opportunity for judicial review – even judicial review of the question whether the regulated party was within the EPA’s jurisdiction.” (emphasis added).

The court then concluded the compliance order was a final agency action and there was no adequate remedy other than APA review. The judgments of the lower courts were, therefore, reversed.

In a strongly worded concurring opinion, Justice Alito left no doubt as to his position on the matter.

The position taken in this case by the Federal Government – a position that the Court now squarely rejects – would have put the property rights of ordinary Americans entirely at the mercy of Environmental Protection Agency (EPA) employees.

[i]f property owners begin to construct a home on a lot that the agency thinks possess the requisite wetness, the property owners are at the agency’s mercy.

And if the owners want their day in court to show that their lot does not include covered wetlands, well, as a practical matter, that is just too bad.

In a nation that values due process, not to mention private property, such treatment is unthinkable.

In summary, regulated parties can take some comfort in knowing they have, at least, an avenue for review of agency actions such as EPA compliance orders.